Conventional payroll processes are plagued by data entry errors, time-consuming manual data entry, and costly payment methods that take too long. If you’re a payroll platform, it’s time to offer your customers a better way to manage their staff payments.
One way to do that is with open banking for payroll. Open banking uses application programming interfaces (APIs) to enable third parties to initiate payments and access financial data from bank accounts with the account holders’ permission. For payroll providers, this means a way to automate instant account-to-account payments en masse — and much more.
In this guide, we’ll share everything you need to know about open banking for payroll.
Want to offer improved payroll services, including Bulk Payments? Reach out to us to speak with an open banking expert.
What are the benefits of open banking for payroll?
Open banking empowers payroll platforms and other providers to do two main tasks:
Initiate instant payments — including Bulk Payments and recurring payments — directly from one account to another, or multiple accounts.
Access real-time transaction data from their end users’ accounts.
For payroll use cases, the benefits of open banking typically revolve around payments, which is generally a time-consuming and costly process for businesses. For instance, companies often rely on BACS payments, which usually take three days to clear — and cost between five and 50p per transaction (plus bank fees and setup costs).
Additionally, BACS is typically not very user-friendly as each payment needs to be set up individually. This becomes particularly problematic when businesses work with freelancers or contractors who don’t have conventional recurring regular payments.
What’s more, payroll is often a risk of input errors due to a high amount of manual entry. These can cause delays in payments and require additional administrative work to verify and resolve.
Open banking can help you provide a solution so your customers can overcome these issues:
Open banking enables near-instant account-to-account payments using Faster Payments rails, so funds typically settle within seconds, subject to bank processing and system availability.
Open banking can reduce per-transaction fees compared with some traditional methods, such as card or BACs payments, especially at volume.
With open banking payments, per-transaction fees are minimised. Plus, you can batch payments together in Bulk payments, allowing multiple payments to be made in a single transaction, reducing the overall cost.Open banking enables near-instant bank account validation, helping businesses gain confidence that payments are being made to the correct accounts. The Instant Payments Regulation will mandate Verification of Payee (VoP) for PISPs using SEPA Instant transfers in the EU from October onwards, meaning you need to think about how you’ll meet this regulatory requirement now.
Open banking allows businesses to access data from users’ accounts in real-time. This facilitates easier account validation, meaning businesses using open banking payments for payroll can pre-validate bank account ownership and meet the IPR’s VoP requirements while automating the process to significantly reduce payroll errors caused by manual input.
The result is simpler, more affordable, and compliant processes for payroll teams, and a better, more reliable experience for employees.
What to look for in an open banking provider for payroll
If you’re a payroll platform looking to offer payment solutions built on open banking technology to your customers, you’ll find many different open banking solutions out there to support you.
Open banking connects businesses to banks using APIs. But for you to easily integrate with each bank and its separate APIs, it’s best to work with a single open banking API.
However, the way these APIs work can differ depending on the various services open banking providers have built their solutions to deliver — and not all of them are necessarily the right fit for payroll providers.
Here are some of the key things to look out for in an open banking solution for payroll:
The types of payment on offer. An open banking solution that offers payment services is known as a payment initiation service provider (PISP). But the types of payment that each PISP offers can differ.
Almost all open banking providers support single immediate and scheduled payments. These are instant payments that are processed directly from one account to another — and they’re generally standard for open banking platforms.
One of the payment types that’s most important for payroll platforms is bulk payments. This is a type of transaction that processes multiple payments in a single API call — saving you the transaction fees you’d traditionally have to pay on BACS payments, for instance.
Another payment type to look out for is variable recurring payments. This allows you to make recurring payments of varying value — which can be useful to simply pay freelancers and contractors.Data services. If you want to use an open banking solution for data or account validation, you’ll need to work with an account information services provider (AISP). This is an open banking API, but it’s authorised to access bank account data — not initiate payment. Importantly, not all open banking solutions are AISPs.
For most payroll use cases, you’ll only need basic raw data, i.e., data that hasn’t been enriched. This is all that’s necessary for instant account validation, as you simply need to see that the owner of the account matches the name of the employee, for example.
However, for other services, you may also want to use enriched data. If you do, you’ll need to ensure that your open banking platform provides this — and understand how it enriches data. You can find out more about that in our guide to transaction enrichment.Scalability. If you’re a payroll platform, you’ll likely be working with many SMEs or enterprises, and so you’ll be handling a high volume of payments. Businesses obviously need to pay all their staff every month, so you’ll need an open banking solution that can handle this volume of transactions.
Bulk Payment services mean that you can process multiple payments in a single transaction. But even so, you’ll need to choose an API that can handle this volume with high levels of uptime and stability. To be sure of that, check that the solution’s API technology has been rigorously tested.Coverage for business and consumer accounts. Coverage is the term for the number of banks and financial institutions an API connects within a given region. For instance, some open banking platforms will have high coverage in Europe, but not elsewhere.
Plus, while some APIs connect well with consumer accounts, their business account connectivity may not be well-tested. Typically, banks use separate APIs to speak to consumer and business accounts. If you’re a payroll company, you’ll need to connect to business accounts to authorise payments.
It’s likely that you’ll be working with many different businesses — potentially across the world, which means you’ll need to ensure your open banking solution has coverage to serve all your potential customers.Security. If you’re supporting businesses to make payments to their employees, check that your open banking provider’s security procedures are up to scratch. That means the API should have the compliance and security features to match, such as standard encryption. Look to see that a solution has certifications of compliance with the likes of PSD2 and GDPR — at the very least.
User experience. Another critical consideration is how your customers experience payment services built on open banking technology through your platform.
As a platform, you’ll likely want an open banking solution that integrates seamlessly into payroll systems so that users aren’t taken to an interface they don’t recognise. As such, it can be worth looking for a platform that offers a white-label solution.
Why choose Yapily as an open banking solution for payroll
At Yapily, we’re an open banking infrastructure platform with some of the broadest coverage in Europe.
We’ve built our platform to support the needs of businesses of all sizes, including Pleo, Intuit QuickBooks, Iris Kashflow, and Crezco, to support their open banking needs.
In the rest of this article, we want to share why you should consider Yapily as your payroll payments solution.
1. You’ll get reliable coverage for payments and data services across Europe
Without the right coverage from your open banking platform, you won’t be able to support business customers in all the markets you want to enter. This can limit your options for growth in the future.
At Yapily, we have some of the best coverage for open banking in Europe. We connect with nearly 2,000 banks for payments and data services. We’re both a PISP and an AISP, meaning we can help you with payment and account validation in all the geographies where you use open banking.
We also support both consumer and business account connectivity, and we rigorously test our connectivity with these account types using real customer and business accounts.
Aside from having extensive coverage in Europe, we offer a wide range of payment types through our Yapily Payments product. For instance, we offer Bulk Payments, which mean lower fees for your payroll customers — giving you a significant advantage in a competitive market. We also support single immediate and scheduled payments, and sweeping VRP.
What’s more, if you want to use open banking for account validation, our Yapily Data product can support that too.
2. You’ll scale reliably with our regulated, security-certified, and white-labelled infrastructure.
Our open banking infrastructure solution is rigorously tested and performs well under heavy load.
We also ensure that working with Yapily is as easy as possible. We provide all the support you need to make it as straightforward as possible to integrate with our API and to onboard customers.
You can trust that we have resilient, secure, and trustworthy technology. Yapily is a supplier on the Crown Commercial Service’s Open Banking Dynamic Purchasing System (DPS). Plus, alongside being PSD2 and GDPR compliant, we’re ISO27001-certified, meaning that our information management meets globally recognised best practices.
With Yapily, you can fully white-label your open banking experience. We also offer hosted solutions, so you can get started right away while we work on your white label solution.
How Crezco uses open banking for bulk payments with Yapily
Crezco is a payment platform for SMEs, supporting invoicing, accounting, and e-commerce features. Its goal is to solve three financial pain points for small businesses: late payments, fees, and reconciliations. It uses open banking to do exactly that.
Crezco works with Yapily to enable over 5,000 businesses to trade and easily access financial solutions. Namely, Crezco offers its customers more convenient checkout solutions that help them get paid faster and safeguard their cash flow.
The company came to Yapily to help them streamline accounting solutions for their partnership with Xero. The goal was to enable Xero’s customers to process payments using open banking. Using Yapily, it was also able to offer Bulk Payments.
Now, Xero customers can:
Register with Crezco to view all their invoices in one centralised location
Submit requests for invoice payment approvals directly through the platform
After receiving approval, process Bulk Payments using Yapily’s open banking technology.
Find out more about Yapily’s collaboration with Crezco: How Crezco + Yapily optimise payments for 5,000+ businesses
Choose Yapily as your payroll solution
In this guide, you’ve discovered the key details about using open banking for payroll. Now, all you need to do is choose a provider that suits your needs.
At Yapily, we offer extensive European coverage for data and payments, including our Bulk Payments product. Plus, we’re one of the few open banking platforms with tested and fixed connectivity for business and consumer accounts.
Ready to use open banking for payroll? Reach out to us to speak to an expert.
Yapily Ltd is authorised and regulated by the Financial Conduct Authority under the Payment Services Regulations 2017 to provide Account Information and Payment Initiation Services with no. 10842280.
Yapily provides regulated open banking connectivity and infrastructure services to business clients. Yapily does not provide payroll services, employment advice, or assume clients’ regulatory obligations (including tax, employment, or payroll compliance).
Any benefits described (such as faster settlement, reduced errors or lower processing costs) depend on each client’s implementation, counterparties and bank performance